CPSIA – McDonald’s Fallout Continues

The spectacle of the McDonald’s cadmium “scare” continued to unfold today.

Let’s not forget that this recall was “urged” by the CPSC although the CPSC admits in writing that the glasses are “non-toxic”. In other words, the glasses are safe. As the manufacturer notes: “‘It could have been any glass company,’ said Ron Biagi, an executive with Arc International, which made the glasses. ‘We all do the same thing using materials from the same suppliers.’” McDonald’s clearly had no choice in the matter, suffering a terrible loss of prestige no matter what the outcome. So the CPSC, Rep. Jackie Speier, one anonymous tipster and a hyperbolic press forced a highly wasteful and destructive recall.

The tumult, chaos and confusion thoughtlessly spawned by the CPSC continues to unfurl in almost predictable fashion: “But the returns [to McDonald's] are just the beginning of the next chapter in the cadmium debate, with the CPSC poised to set new limits on the metal even as it downplays the McDonald’s recall and environmental advocates aim to use the episode to build momentum for reform of federal toxics law.”

A terrible move deserves an even worse follow-up.

What’s the cause for alarm here? The glasses are safe, so says the CPSC . . . as it dramatically lowers the standard for cadmium. Yeah, nobody’s worried.

The consumer group talking heads can’t resist chiming in: “Don Mays, senior director of product safety for Consumer Reports, said cadmium was being used in some manufactured goods to replace lead, which has been eliminated from many products in response to heavy regulation and widespread health concerns. Many of those goods were once commonly associated with lead, like paint and inexpensive jewelry. ‘We’re just starting to see this,’ Mr. Mays said. ‘It’s starting to creep into a lot of consumer products that never had it before.’”

Does anyone care that the CPSC SAYS THIS ISN’T TRUE? “After an Associated Press investigation first uncovered the high cadmium levels in some children’s jewelry, CPSC Chairwoman Inez Tenenbaum publicly warned manufacturers in Hong Kong not to replace lead with cadmium or other toxic metals. Tenenbaum told senators in April that ‘we really don’t think’ companies are deliberately swapping out lead for other hazardous chemicals, ‘but we think they’re being careless and not realizing that you cannot use these metals in children’s products.’” [Emphasis added]

Some in the press aren’t persuaded. After all, urban myths are true . . . aren’t they? “[David Lazarus of the LA Times] notes that Cadmium has probably stayed off the radar for so long because people weren’t widely aware of its use. The focus has primarily been on the danger of lead products, and lead product replacements weren’t a primary concern. Chinese manufacturers began using Cadmium insted [sic] of lead to get the same vivid pigments in product colors.” Right. David Lazarus knows all about this.

And then there are our Democratic leaders in Congress. It’s election season so there’s little incentive to be a calming influence. “Congresswoman Jackie Spear [sic], who first received the anonymous tip about the Shrek cups, doubts Europe is the Cadmium culprit due to its strict manufacturing rules. Spear [sic] suspects either a subcontractor or ingredient provider in China; China is one of the leading Cadmium producers in the world. . . . Spear [sic] says she has legislation in the works that would expand the Cadmium ban in U.S., specifying removing its use in any product for children.”

And the basis for Rep. Speier’s hunch is . . . what, exactly? The glasses were made in a U.S. factory: “In contrast to the Chinese-made children’s jewelry recalled earlier in the year, the drinking glasses were manufactured in the United States, by the Millville, N.J.-based company ARC International. Ron Biagi, vice president for North American sales at ARC, said he was surprised by the recall and vouched for the safety of the glasses. While environmental and consumer groups pointed to the importance of identifying the producer of the cadmium-tainted enamel used on the McDonald’s glasses, Biagi declined to name ARC’s supplier. ‘It’s not fair for me to pull them in,’ he said.” OMG, somebody decent is left in the world! I had about given up hope.

Having set off the blaze, CPSC Director of Public Affairs Scott Wolfson again spewed more of his patented mixed signals sure to sow seeds of doubt: “‘What’s so important is for parents to understand the difference. … Children are not at an acute risk; the glasses are not toxic,’ Wolfson said, adding that ‘there are no signs we’re looking at a wave here of cadmium becoming the next lead.’” Which is why, Scott, you and your agency acted so promptly to push for a recall of this non-toxic product made of common materials in wide distribution in this country for years without any detectable adverse health effect? Which is why you told America to stop using the oh-so-safe glasses “immediately” in your OnSafety blog? Do I have this wrong? Clear as mud. Very believable, too.

There are terms for this that are too crass for a family publication like my blog. Let your imagination run. How will all this resolve itself? Of course, not very well. Justified by fear of “bone softening” (that sounds HORRIBLE, doesn’t it?) and other bizarre maladies that supposedly COULD befall us from unspecified exposure to cadmium, we will get many new and ineffective regulations imposing yet more devastating costs and devastating risk on the children’s product industry.

While hatred of government is a necessary by-product of the massive self-inflicted injury of the CPSIA, we will more pertinently be faced with the difficult challenge of protecting our life’s work – our businesses. The livelihoods of our friends and associates at our company, the economic well-being of our customers and suppliers (often our close friends, too) and in our case, the economic future prospects of the kids who are being educated with our products, all hang in the balance. I don’t know what stops this freight train before it tragically collides with reality. Certainly not leadership or a show of character from our government.

I hate to close these essays sounding like a Tea Bagger (not that I resent the label). I don’t wish to be marginalized for having strong views about an abdication of leadership and judgment by our government leaders. Say what you will, the McDonald’s fiasco was fomented by politicians with agendas. Many companies and people – and our economy – will be severely damaged as a result.

There’s nothing to be proud of here.

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CPSIA – McDonald’s Fallout Continues

CPSIA – Lowest Common Denominator Government

We saw a display of Mr. Obama’s team in action this past week as McDonald’s was cornered into a national recall of a safe product. How did it happen? Did our government rise to the occasion, or simply resume its descent into the abyss?

“Americans want to be safe. And they expect their federal government to protect them. So that is what I’m here to do.” Chairman Inez Tenenbaum, NPR Report “Under Obama, Agencies Step Up Rule-Making”

Last week in a coordinated media extravaganza, an anonymous caller alerted Rep. Jackie Speier (D-CA) to the trace presence of cadmium in Shrek glasses being sold by McDonald’s. In a rapid fire series of events, McDonald’s announced a voluntary recall of the offending Made-in-America glasses “at the urging of the [CPSC] commission ”. The CPSC apparently pushed for the recall of the glasses by McDonald’s after quickly testing the glasses.

[It turns out that there were two "anonymous tipsters", one of whom is Jennifer Taggart, a regular reader of this blog. Ms. Taggart has acknowledged that cadmium levels on the McDonald's glasses are well within California's Proposition 65 restrictions. Prop. 65 is easily the most restrictive and challenging of the myriad local safety regulations.]

Rep. Speier seized the election year opportunity to lecture McDonald’s on safety: “’Our children’s health should not depend on the consciences of anonymous sources. Although McDonald’s did the right thing by recalling these products, we need stronger testing standards to ensure that all children’s products are proven safe before they hit the shelves,’ said Speier. ‘Cadmium is a toxic substance that is extremely dangerous to the developmental health of children. . . . Thanks to this anonymous tip received by my office, the proper agencies were alerted, necessary action was taken by McDonald’s, and the long-term health of millions of children is no longer at risk.’”

Jackie Speier is a Democrat representing the San Francisco area.

A media deluge followed the recall. Typical of the hyperbole is this article from NJ.com: “McDonald’s announced the voluntary recall after small amounts of cadmium were found in the enamel with which character images were painted on the glasses . . . . Long-term exposure to low levels of cadmium from those glasses can cause various health problems, including cancer, bone softening and severe kidney problems. [NJ State Assemblyman Paul] Moriarty, in a news release, demanded an investigation . . . . ‘It’s stunning that in this day and age our children can still come into contact with toxic materials just by using a glass featuring a cartoon character,’ Moriarty said in the release. . . . ” [Emphasis added] AP could not resist the McDonald’s cadmium frenzy that it helped to create: “A recall of 12 million cadmium-tainted ”Shrek” drinking glasses sold by McDonald’s raises questions about the safety of millions of similar cheap promotional products that have been sitting in Americans’ kitchen cabinets for years.”

It all boils down to trust, right? After all, it’s McDonald’s. McDonald’s is America, McDonald’s is children. If you can’t trust McDonald’s, who can you trust?

I will attempt to answer that question.

First – Can you trust McDonald’s?

Yes, absolutely, without reservation. McDonald’s (not a customer of ours, never was) has the best reputation of any company in the toy industry (in my humble opinion) for safety, conscientiousness and attention to detail. McDonald’s is HARDLY asleep at the wheel. Rep. Speier’s remarks are outrageous but for the fact that she is a California Democrat from San Francisco. Consider the source. I believe McDonald’s ten times out of ten against Rep. Speier.

On the other hand, if McDonald’s is so wonderful, why on Earth did they recall these glasses? Okay, you be the CEO of McDonald’s for a moment – what would you do? Fight for the right to sell cadmium-laced glasses? Argue that the glasses are “safe”, that toxic cadmium isn’t harmful? Please, McDonald’s had no choice because it has to protect its brand. Listen to the Moms in the video above. If they don’t trust McDonald’s, they will walk across the street to Wendy’s. McDonald’s has NO CHOICE but to “do the right thing”. The cost of the recall is a secondary concern. Burn, baby, burn.

Second – Can you trust an anonymous tipster?

Why be anonymous if you are acting “heroically”? Well, for one thing, being anonymous means you aren’t accountable if you are wrong. The two tipsters were using XRF guns, acknowledged by the CPSC to be imperfect and best used to screen for possible faults. It might be embarrassing – or expensive – to start a public panic and then be proven wrong. This mess might be seen as your fault and somebody might want you to pay for the expenses. Hmmm.

What if the caller had reason to hide his/her identity? This is the very worrisome scenario. There are many people who might want to rat out a McDonald’s. How about a competitor? Or a spurned supplier? A disgruntled employee or spouse of an employee? This is one of the primary objections I made to the public database – the potential for abuse is rampant. An anonymous tipster very well might be up to no good. McDonald’s loss could be the tipster’s gain – an ill-intentioned tipster in partnership with a self-promoting fear monger in election season (like Jackie Speier) could be a powder keg. [Ed. Note: It is worth noting for clarity's sake that Jennifer Taggart has identified herself so this discussion does not apply to her.]

This could happen to you, too. The CPSIA encourages this kind of rat-me-out frenzy. How many businesses will close or sell out because of this shameful law? Time will tell. In the meantime, the sport of trashing trademarks and company reputations will thrive at the hands of the “anonymous tipsters”.

Third – Can you trust the CPSC?

We ought to be able to trust them. Have they earned this trust?

Here’s a June 4th tweet from Scott Wolfson, Director of Public Affairs: “Scott_Wolfson: Note to reporters: the recalled McDonald’s glasses are not toxic.” Interesting – the CPSC apparently pushed for the recall of safe products. Wolfson is also responsible for the press release detailing this recall: “The designs on the glasses contain cadmium. Long term exposure to cadmium can cause adverse health effects.” Same guy. And Wolfson offered these calming words of reassurance to the AP: “Wolfson said the recalled glasses have ‘far less cadmium’ than the [recently] recalled jewelry. He would not say how much cadmium leached from the glasses in tests, only that it was ‘slightly above the protective level currently being developed by the agency.’”

I believe Mr. Wolfson is the author of the CPSC’s OnSafety blog – here’s how he counseled consumers about the McDonald’s glasses in a recent post: “If you bought these “Shrek Forever After 3D” glasses at McDonald’s – millions of you did – stop using them immediately. . . . The glasses contain low-levels of cadmium. . . . The company has stepped up to do the right thing [in issuing a recall].” [Emphasis added] He also justified the recall of non-toxic glasses in the New York Times as follows: “Both C.P.S.C. and McDonald’s are being highly protective of children in announcing this recall.”

Scott has a way with words, doesn’t he? Makes you wonder what his job is, exactly.

So the CPSC admits that the glasses were safe. Yet the “commission” urged McDonald’s to recall the glasses. Why? Wolfson says implausibly that the CPSC was being “highly protective” in recalling non-toxic glasses. Actually, “Why” may not even be the right question.

Let’s consider the question of “how”. On what legal basis did the CPSC press McDonald’s to take this step? The authority of the agency to demand a recall depends on the presence of a “substantial product hazard”. There is no other basis for the agency to take action – it cannot act on whims or because it is always crabby on Mondays. I have addressed this issue previously in this space, and noted that the authority to initiate a recall is based on the existence of “a product defect which (because of the pattern of defect, the number of defective products distributed in commerce, the severity of the risk, or otherwise) creates a substantial risk of injury to the public.”

If the CPSC’s Director of Public Affairs notifies the press that the product is not toxic, it is incontestably certain that the glasses don’t present a substantial product hazard in this case. For perspective, consider the views of the U.S. factory responsible for the glasses:

“[VP Ron] Biagi . . . added that [in addition to McDonald's] Durand Glass also does material safety tests. ‘We will do nothing (different) because we don’t need to,’ Biagi added. ‘You are always looking for the most healthful way to make a product. What we’re producing today, it is safe.’ Biagi said there are multiple suppliers, domestic and foreign, of the enamel used for the Shrek glasses. Other glass producers use the same product, he said. Late Friday, the company issued a short statement from its CEO for North American operations, Fred Dohn. ‘All the products, whether decorated or undecorated, that Arc International is delivering on the markets meet the highest standards of quality and safety,’ Dohn stated. ‘Arc International is a professional manufacturer that stands behind all its products. We therefore see this as an internal decision by McDonald’s and will be investigating the matter once we receive more information.’”

So what gives? By all appearances, the leadership of the agency substantially exceeded its legal authority in pressuring McDonald’s to recall these glasses. Any problem with that?

I won’t insult your intelligence with a rant about the trustworthiness of the Democrats who are running the shop these days. If you trust Jackie Speier and the like after this sorry tale, I can’t help you.

In closing, let’s recall the words of Ms. Tenenbaum: “Americans want to be safe. And they expect their federal government to protect them. So that is what I’m here to do.” By all appearances, Ms. Tenenbaum was doing exactly what she promised – her agency is wrapping you in bubble wrap whether you need it or not. She says that’s how you want it – no matter that it’s outside her legal authority, well-beyond any notion of common sense and implemented with a complete disregard to economic consequences or the impact on other market participants. It’s okay because the press eats it up . . . and it helps reelect members of Congress. Everybody’s a winner as we sink into the abyss.

Lowest Common Denominator Government. Yes We Can.

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CPSIA – Lowest Common Denominator Government

CPSIA – The TIA Just Wants to HELP You!

• Our companies are members of the Toy Industry Association (TIA).
• We are on the record as opposing the Toy Safety Certification Program (TSCP).
• The dues of TIA members paid (and continue to pay) for the development of the TSCP, as well as the salaries and bonuses of the representatives mentioned below.
• The “15 month rule” will soon be released by the CPSC (on or before November 14). It will address, among other things, testing frequency and sample sizes for testing, and is expected to include the so-called component testing rule.

Did any of you watch the lengthy TSCP hearing (video link and text link) at the CPSC on October 14? This hearing was apparently jointly requested by the TIA, Consumers Union (CU) and Consumer Federation of America (CFA). Interesting bedfellows, huh? This hearing provided much to reflect upon. In this post, I will address the issues presented by the TIA’s program and the TIA’s authorship from a small business perspective. I will return to the consumer groups later.

[Some of my readers may be from outside the toy industry and may think "This does not apply to me!" Please bear with me and read on. This may not be your problem TODAY, but it is a sign of things to come.]

TSCP Basics:

The TSCP is a complicated initiative that is difficult to explain succinctly. Here is the document defining the TSCP. You can access the TSCP website here. While I will attempt to summarize it here, you should rely instead on the definitive documents published by the TIA.

The TSCP is a program designed by the TIA to ensure that toy companies comply with law. As Elizabeth Borrelli (Executive Director, TSCP) puts it: “TSCP is a conformity assessment system. It is not a testing program but a comprehensive, effective and efficient system to verify that toy manufacturers have satisfied requirements of the CPSIA (and retailers) and that their toys confirm to applicable safety standards.” The TIA says that the TSCP is a “work in progress”.

The TSCP goes far beyond the requirements of the CPSIA. [The TIA acknowledged this repeatedly at the hearing. For instance, see the video at 134:30 and 149:30.] It is also a “voluntary” program, not a requirement of law. The TIA wants to foster broad acceptance of its initiative. They presented it to the CPSC for the agency’s endorsement. Carter Keithley, President of the TIA, called the need for CPSC support “absolutely crucial”. [Also, see the video at 135:15.] According to the TSCP specifications, the program includes: “1) hazard analysis andor risk assessment for toy product design, 2) factory process control audits and 3) production sample testing to validate that the factory is producing, at the time of sampling, toys that meet U.S. safety standards. These three elements will be verified or audited by accredited certification bodies.”

A few details about the TSCP:

• Factory Ratings – There are three levels of factory compliance under the TSCP: Tier 3 (non-ISO 9001 factories), Tier 2 (ISO 9001 factories) and Tier 1 (ISO-9001 factories that have met unspecified additional criteria to be established by the TSCP). Mass market factories are highly likely to be Tier 1, and small fry factories are likely to be Tier 3 or Tier 2. The terms below, according to the TIA, are designed to provide an “incentive” for non-Tier 1 factories to raise their compliance to Tier 1 standards. [Too bad for you if you and your factory don't want to incur this expense.]
• Hazard assessment – This pre-production analysis must prepared by or under the supervision of a responsible officer of the company on a product-by-product basis and must be attested to in writing. [Remember this.]
• Testing Sample Sizes - Under 3′s: not less than 18 pieces; over 3′s: not less than 12 pieces; big or expensive items: not less than 3 pieces; under 1000 pieces sold per year: sample size TBD; minimum production run: 500-1000 pcs (whatever this means).
• Sampling procedure – Tier 3 – need outsider to select all samples; Tier 2 – outsider picks samples randomly 4-6 times per year; Tier 1 – The factories select samples themselves.
• Testing frequency – Tier 1: greater of once a year or every million pieces, plus one extra heavy metals test annually (Max – never more than four times a year); Tier 2: greater of twice-a-year or every 500,000 pcs. (Max – monthly); Tier 3: greater of quarterly or every 150,000 pcs. (Max – every other week). [You read that right.]
• Security – Samples must have special seals to avoid “adulteration”

The TIA insists that the TSCP was designed with small business in mind, has been vetted by small business interests and has been applauded by small businesses.

What Happened at the Hearing:

The TIA spent a great deal of time explaining the terms of the TSCP. The consumer groups spent their time explaining why this program that goes far beyond the law ISN’T ENOUGH. The CPSC Commission asked a lot of questions and spent a bit too much energy (in my view) complimenting the TIA on their work. One Commissioner (Anne Northrup) pushed back with probing questions about TSCP economics and the intiative’s impact on small business (see the video at 78:49 for about 15 minutes and later at 146:35).

What Does the TSCP Mean for Small Business?

The TSCP, if adopted, would be catastrophic for small toy companies or companies making toys with factories catering to the specialty market (rather than the mass market). Although the TIA denies this point (explicitly), the TSCP significantly favors mass market companies in an almost shameless way. Consider, for instance, the cost of participation in the TSCP. Rick Locker, outside counsel to the TIA, talked about a cost of $65 per item to enter the program. [He noted that for this $65, toy companies "now have $2 million of technology available to them" (123:48). Hey, TIA Members, do you realize what Mr. Locker means? The website they created cost $2 million. That's some fancy website they built with your money.] Upon questioning by Ms. Northrup, none of the TIA spokespeople would admit or guess at the overall cost to participate in the program (84:00 – and check out Northrup’s reaction at 85:15).

What might those costs be? Well, we know it costs $65 per item simply to key the product into the website. Then there’s the cost of the rating of the factory. [The TIA insists that this cost will not be borne by importers but instead by the factory. See video at 150:50. Apparently, this overhead is not passed along to the factory's customers, unlike all other factory overhead.] What might this cost? The TIA provided no estimates. I believe the one-time cost of becoming ISO 9001 is estimated at tens of thousands of dollars from a “standing start”. Likewise, the comparable compliance process with ICTI-CARE (Toy industry Code of Conduct) ain’t cheap. Figure TSCP ratings to cost thousands, and possibly much more, depending on the actions required to make the transition to the new TSCP standards. Then there’s the cost of regular audits and re-certifications. Many of the new requirements will likely lead to on-going, incremental administrative expenses at the factories, suggesting that product costs will float upward on a go-forward basis under the TSCP.

Finally, the TSCP costs will include all the usual safety tests required for each participating item, plus additional testing and processes. I have previously posted typical safety test costs in this space. [Rick Locker cited a cost of $300 per phthalate test in his testimony, as a point of reference.] INCREDIBLY, by publishing the TSCP terms, the TIA has apparently conceded that safety testing might be necessary or desirable multiple times per year. Testing frequency has NEVER been regulated by the U.S. government previously but will be addressed by the “15 month rule” shortly. I believe the TIA’s actions here will provide cover for the CPSC to impose similar testing requirements, despite the obvious market interference. How easy will it be for me, as an industry participant, to argue against testing frequencies put forth by my own trade association? Surely they are looking out for my best interests and would only suggest what’s reasonable and necessary – RIGHT?! Ummm, let me get back to you on that . . . .

Taking all of the above into account, I personally think the per-item cost to “pass” TSCP will be in the many thousands of dollars per item per year. For illustration purposes, however, I think we can confidently use a cost of $5,000 per item (all-in, blended). [Yes, I am predicting a blended cost of $5,000 per item to get this coveted certificate. Quite affordable . . . .]

How would a $5,000 TSCP cost affect you versus Big Toy? To answer this question, we must make some reasonable assumptions. For Big Toy, I am going to assume annual production of 1 million units of a hypothetical toy at a Tier 1 factory. For you, I am going to assume production runs of various sizes, all at a Tier 3 factory (which means you must test each time you produce, since you are unlikely to produce more often than twice-a-month!). For both you and Big Toy, I am going to assume a FOB factory cost of $5.00 per unit.

Here are the numbers:

Big Toy:

• COGS: $5.00
• TSCP: $5,000
• Production Size: 1,000,000 per run (or per year, doesn’t matter under Tier 1 rules)
• Cost per unit for testing: $5,000 divided by 1,000,000 ($.005, rounded to one penny)
• New blended cost, including testing: $5.01, or a cost increase of 0.1% – NOT BAD FOR BIG TOY!

You:

• COGS: $5.00
• TSCP: $5,000
• Production Size: Various run sizes illustrated below (as a Tier 3 factory, you will test each lot)
• Cost per unit for testing: 1,000 pcs – $5.00 per unit; 2500 pcs – $2.00 per unit; 5,000 pcs – $1.00 per unit; 25,000 pcs – $.20 per unit
• New blended cost, including testing: 1,000 pcs – $10.00 (a cost increase of 100%); 2,500 pcs – $7.00 per unit (40% increase), 5,000 pcs – $6.00 (20% increase); 25,000 pcs – $5.20 per unit (4% increase).

Call me crazy, but I think this is rather favorable to Big Toy. Let’s see, a cost increase of 0.1% versus a cost increase of 4-100%, which is better? Notably, for importers that sell to dealers, these cost increases are MULTIPLIED at retail, only compounding the competitive problem. The TSCP-induced gulf between specialty and mass markets costs will massacre specialty market toys. MASSACRE.

There is simply NO WAY that this program was vetted in any meaningful way by small business. If you were one of the small business reviewers, please announce yourself to my readers by commenting on this post (with name, email and phone number). Let’s have a debate!

There are other factors here that favor Big Toy, such as TSCP sampling methods and sample sizes which will punish small toy companies in more than one way, and TSCP’s required full traceability of components (also found in the RILA-BRC standards).

Even the liability risks under the TSCP favor Big Toy which can afford to provide expensive lawyers to back-up company officers. Notably, the TSCP requires a written personal attestation by a senior company officer of the TSCP product hazard assessment. Do you want to sign this little piece of paper and take on some serious personal liability? If that sounds really good to you, please consider the remarks of Chuck Rogers, Senior Technical Director for the TSCP, at the hearing (139:28): “. . . under CPSIA, when that company official signs that attestation, and it becomes part of what is required to get a safety mark [under the TSCP], I can tell you company officials I have talked to take that very, very seriously and they’re going to be extremely cautious and prudent before they sign that. AND IF SOMEONE DOES SIGN AN IMPROPER ATTESTATION, AND THAT PRODUCT IS LATER FOUND TO HAVE A SIGNIFICANT DEFECT, YOU KNOW, IT WOULD BE WITHIN THE COMMISSION’S PURVIEW, I SUSPECT, TO ASK FOR THAT ATTESTATION.” [Emphasis added.] So, in other words, the TIA is trying to sell this program to the CPSC as a source of evidence to be used against its members and its industry. Love it! Where do I sign up?

A Few More Hearing Highlights:

- Ms. Tenenbaum asked about counterfeit certificates. The continuing interest of the CPSC in the “switcheroo” and other nefarious acts mystifies me. What is the basis for treating me and all other members of our industry as scumbag cheaters? Why is this kind of question even posed? Of course, the TIA only feeds these suspicions by specifying tamper-proof seals on samples. Why would such a thing be necessary, other than a conviction that toy companies are such creeps that consumers and the government can’t only trust them? How often does this kind of fraud happen, and if the CPSC knows about it, why haven’t they acted decisively against the bad guys? Your guess is as good as mine.

- The hearing featured several TIA assertions that small businesses will be so, so grateful for the TSCP. The most surreal sell job was by Chuck Rogers, who illustrated virtually every remark with anecdotes from his days at Sunbeam and Wal-Mart. Very relevant to this topic. . . . Rick Locker twice gave detailed explanations of how small businesses will save money with the TSCP (at 77:30 emphasizing reduced record keeping and at 87:50 emphasizing safety test cost savings). Mr. Locker seemed to confuse the cost of factory audits with the cost of safety tests under the CPSIA – he used an example of 20 customers requiring 20 different tests, thereby multipying testing costs 20x. This scenario makes no sense to me since only certain specific safety tests are required to comply with the CPSA, as amended. You don’t need a different safety test report for each customer – but you might need a different audit report for each mass market customer. Factory audits, notably, are a mass market phenomena, and typically confront small businesses only when dealing with mass market customers.

- The TSCP is good news for you, according to Elizabeth Borrelli (90:40): “If [the TSCP] was significantly additive [to costs], then our membership and our Board wouldn’t support us moving forward with it, frankly.” Feel better yet?

Final Thoughts:

The astounding TSCP initiative crafted by the TIA is a BUSINESS. The TIA, in proposing it, is going into business in competition with certain of its members. This move is troubling for a trade association. In addition, the TSCP adds significantly to the burden of the already excessively burdensome CPSIA. To promote this change to a regulator seemingly predisposed to treat our industry harshly is reckless and shortsighted. It is known, however, that certain toy companies are already planning to take these compliance steps and more. [In response to a question by Commissioner Adler, Hasbro's representative at the hearing confirmed that Hasbro will exceed the TSCP requirements.] Was the TIA acting with the notion that what’s good for Big Toy is good for everyone else? Amazingly, this disruptive program is clearly favorable to only a small handful of TIA members and seemingly disadvantageous to a far larger number of toy companies. [I don't put much stock in the hand waving by TIA representatives at the hearing - show me the detailed analysis proving that this initiative saves money for any small business.] Given the heavy presence of mass market companies behind the development of this program, the mass market benefits and focus come as no surprise (to me).

It is worth noting one more full disclosure item: Earlier this year, I asked the TIA to help defray our advocacy expenses in opposition to the CPSIA. Despite their massive lobbying budget, they turned me down for several reasons. In a remarkable phone call, they explained to me that, among other things, (a) the TIA would not contribute to the expenses of the Alliance for Children’s Product Safety unless I would allow them to exercise control over its activities, and (b) they believe the law would never be changed and preferred to channel the TIA’s “limited” resources into efforts to live with the law. [There is obviously a gulf between my views and theirs.] In any event, whether it is cause or effect, the TSCP seems to have attracted a multi-million dollar investment by the TIA and essentially it appears that the TIA burned the bridges behind it – promoting the TSCP now is a primary focus of the TIA.

For those TIA members who have gotten this far in this long post, you may want to ask a few questions of TIA officers and board members.

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CPSIA – The TIA Just Wants to HELP You!

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